Download pptx - What VCs Are Looking For

Introducing…..

22 TopVC

Funds

28 TopVCs

Roelof BothaSequoia Capital

Mike MaplesFloodgate Fund

George ZacharyCharles River Ventures

Sean DaltonHighland Capital

Howard MorganFirst Round Capital

Tim DraperDFJ

Harry WellerNEA

David CowanBessemer Venture

Mitchell KertzmanHummer Winblad

Scott SandellNEA

Gus TaiTrinity Ventures

Steven DietzGRP Partners

Ann WinbladHummer Winblad

Jim GoetzSequoia Capital

Roger LeeBattery Ventures

Ken HoweryFounders Fund

Eric HippeauSoftBank Capital

David LeeSV Angel

Ted AlexanderMission Ventures

Robert KibbleMission Ventures

Jim BoettcherFocus Ventures

Kevin McQuillianFocus Ventures

Mike HodgesATA Ventures

Alan PatricofGreycroft Partners

Rich WongAccel Partners

Vish MishraClearstone Partners

Randy KomisarKleiner Perkins

Peter WagnerAccel Partners

8 Amazing

Founders

Alex MehrZoosk

Osman RashidChegg

Michael BirchBebo

Paul ScalanMobiTV

Alfred LinZappos & Sequoia Capital

Kevin HartzXoom & Eventbrite

Rajiv LaroiaFlarion

Ben ElowitzBlue Nile & Wetpaint

70+ Most

SuccessfulStartups

One Question:Why so many startups fail while few defy all odds to

become billion dollar successes?

What’s their secret sauce?

35 Experts Answer:

Straight from the gut talk on startup successes & failures…….. war stories

behind top startups

What you will learn:1. Why startups fail?

2. What are the most common pitfalls you can avoid?

3. How to pick winning ideas and markets?

4. How to build winning teams?

5. How to pick investors?

6. When to ramp up or down?

7. When to sell or grow to IPO?

8. How to recover failing startup?

Five Must-Know Facts for Entrepreneurs

1. Big & Bold Idea (Non-consensus idea)

2. A.I.M. (Authenticity, Integrity, Motivation)

3. A+ DNA (Winning Team)

4. R.I.P. (Rapid Iterations & Pivoting)

5. Objectivity & Adaptability

1. Big & Bold Ideas

Non-consensus and unconventional ideas are in fact less riskier and more likely to succeed…….

So Dream Big, Be Bold & Go For It

2. Authenticity, Integrity & Motivation

Purity of your passion and integrity combined with 10k hours leading to authenticity serve as talent

magnet to attract best in business to join you

So A.I.M. high

3. A+ DNA

Startup success is all about people. Passionate and authentic entrepreneurs attract “A+” team and

build winning cultural DNA

So never settle for anything less than A+

4. Rapid Iteration & Pivoting

Hardly any original business plan made it to final winning product. Fast trial and error is key to land

product-market fit.

So iterate and pivot at very high RPM & with Small Turning Radius

5. Objectivity & Adaptability

Be passionately disinterested by actively looking for truth without bias about outcome. Then accept

and adapt.

No idea is worth billion dollar so listen to the data and market

What’s Driving VCs?

LPs invest usually 5-7% of their asset in the VC fund for diversification. Venture Capital falls within very high risk high return asset class

VCs need to deliver very large returns in line with the objective of this asset class

Most investments will fail……fail to either return principal or give mediocre 1-2x returns. That’s a failure.

VCs manage a fund for their investors called LPs or Limited Partners

But one or two investments, if picked right, can give 10-20-100x returns and more than pay for all other investments

Copyright VCs At Work Tarang Shah

That’s what drives VCs. They want to be part of building that next Google, Groupon, Facebook, LinkedIn, Twitter that can deliver 5-10x return on the entire fund. That’s success.

What do VCs Look for?

Market First

Most VCs are in either Market First or Entrepreneur First Category

First identify promising

market

Look for promising team

than can execute in that market

Entrepreneur First

First identify promising

Entrepreneur

Follow their lead into promising

market opportunity

What do VCs Look for?

Billion Dollar Market

You need both great market and great entrepreneur to build billion dollar startup..

Promising Entrepreneur

SuccessfulStartup

Successful startup happens when a great team collides with a billion dollar market opportunity...

VCs are looking for startups that are positioned well for this collision….

What do VCs Look for?Copyright VCs At Work Tarang Shah

Extended Team

Scalability (Sales, Business Model,

Product

Core Team

Product/ Idea

Market

Cofounding Team

Stage 0Formation

Stage 1Build & Prove

Stage 2Grow & Scale

Funding Type

How Much?

Typical Valuation

Dilution

Seed Super Angel Series A Series B Series C Series D, E, F

$50-500k $500k-2M $3-7M $7-25M $15M+ $25M+

$1M $3-5M $5-10M $15M+ $50M+ $100M+

25-40% 5-10%

???

Product-Market Fit

Combination of Charisma, authenticity and genuine passion creates a talent magnet to attract best in business to join him…

Anatomy of Successful Entrepreneurs

Balanced Ego – Big ego to pursue unconventional ideas but in-check ego to surround with people smarter than him

Authenticity – Product view informed by 10k hours of tinkering; deep experience that provides insights into the fine nuances of market and customer

Passionate Disinterest – Passionate to seek out the truth but not biased about the outcome – highly objective

Big & Bold Head – “The World is Not Enough” ; Not afraid of non-consensus view

High Integrity – Transparent

and Trustworthy

Real Visionary – Can see the whole company beyond current product

Genuine & Avid Passion to solve the problem and make a difference -> A Missionary

Personal Relevance to the pain point being solved – motivation beyond making money

Iterative – Not afraid of failures but like Edison enjoys discoveries through methodical trial and errors

Extremely Focused – breaking vision into short-term metrics and single-mindedly pursuing it.

Big Ears – Listens actively and intently to customers and analytics


Anatomy of Successful Cofounding Team

Complementary Skills (e.g.

business, tech)

• Reduces friction• Creates multiplier

effect

Proven Chemistry

• Extremely important to get past small and big differences that will arise

• Keeps focus on winning as a team

Past Successful Working

Relationship

• Working relationships and structure is pre-determined and can hit the ground running quickly

High Potential

Cofounding Team

• Becomes a talent magnet to attract core team

1. Reduce the risk of dissonance and hence risk of failure

2. Hit the ground running from day 1 than work on chemistry


Anatomy of World Class Team

1. Surround yourself with people smarter than yourself – key is not to get intimidated or feel insecure around smarter people

Hire for Cultural fit as much as

functional skills

Hire People you have worked

with well before

Lift the quality of team with each hire and

fire

Hire people who can start adding value day 1 – No time for training

Hire unfettered passion without

ego & restrictions of past learning

Fire promptly and amicably

someone who is not fitting well

2. Six rules of smart team building…


Identifying promising new markets

Changing Customer Behavior

Promising new markets are usually formed at the cross section of changing customer behavior and new

technology

New Technology

Highly Attractive

Market

Supporting Infrastructure

Youtube is a great example of this. Sequoia partner Roelof Botha provides great insights about this in the

book.

Changing Customer Behavior

• P2P Video sharing as a new customer behavior was reaching a tipping point in 2005

• 2004 Asian Tsunami UGC video sharing showed market timing was right

New Technology

• Availability and mass adoption of handheld camcoders

• Flash made is easy to watch videos right into internet browsers

Supporting Infrastructure

• Broadband and PC penetration provided widespread infrastructure for creation and sharing of UGC videos

Highly Attractive

Market

• Creation of billion dollar UGC video sharing market

Identifying promising new markets

Identifying New Promising Markets

Every new platform that embeds itself becomes a fertile ground for sprouting next group of billion dollar

startups

Transistors

Chips

1950 1960 1970 1980 1990 2000

Micro Computers

PCsIntel

AppleMicrosoft

3ComCisco

NetscapeeBayAmazon

???

IBM LANsWANs

Internet

Mobile

What are some of the Emerging Platforms Today?

Smartphone iPad/ Tablet

PayPal Amazon ???

Facebook Twitter

???

Making of New Markets

Horse

Collision of two technologies spawns a new species

Donkey Mule

Flarion (acquired by Qualcomm for ~$1B) is a great example…

Wireless and internet were evolving as two different silos and needed to be brought together to make rich media internet work on wireless

Disrupting Established Markets

Fat Cats

Creating 10x advantage with new technology

New Technology

New Lean Mean Cat

• Stagnant, Non-innovative and Non-responsive lazy cats

• Leveraging Technology to create 10x value-add over incumbents

Fat Telcos P2P Sharing Skype

Blockbuster Internet Netflix

Shrinking a dollar to make 10 cents (e.g. internet ads)